SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For Quarter Ended June 30, 1997 Commission File No. 1-7939
------------------------- -------
VICON INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
NEW YORK STATE 11-2160665
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
89 Arkay Drive, Hauppauge, New York 11788
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 952-2288
(Former name, address, and fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
At June 30, 1997, the registrant had outstanding 2,802,728 shares of Common
Stock, $.01 par value.
<PAGE>
PART I - FINANCIAL INFORMATION
VICON INDUSTRIES, INC. AND SUBSIDIARIES
(CONDENSED) CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
6/30/97 6/30/96
Net sales........................... $13,725,759 $10,901,705
Costs and expenses:
Cost of goods sold................ 9,815,328 8,166,548
Selling, general & admin.
expenses........................ 3,048,456 2,474,716
Interest expense.................. 309,274 209,270
Unrealized foreign
exchange gain................... (6,273) (14,365)
----------- -----------
Total costs and expenses....... 13,166,785 10,836,169
Income before income taxes.......... 558,974 65,536
Provision for
income taxes.................... 16,000 25,000
----------- -----------
Net income.......................... $ 542,974 $ 40,536
=========== ===========
Net income per share $ .18 $ .01
=== ===
Weighted average number of shares
used in computing net income
per share 3,049,335 2,857,545
See Notes to (Condensed) Consolidated Financial Statements.
2
<PAGE>
PART I - FINANCIAL INFORMATION
VICON INDUSTRIES, INC. AND SUBSIDIARIES
(CONDENSED) CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Nine Months Ended
6/30/97 6/30/96
Net sales........................... $37,351,404 $32,269,800
Costs and expenses:
Cost of goods sold................ 26,867,870 24,080,725
Selling, general & admin.
expenses........................ 8,468,881 7,250,572
Relocation expense................ 225,129 -
Interest expense.................. 834,207 629,608
Unrealized foreign
exchange gain................... (39,896) (33,749)
----------- -----------
Total costs and expenses....... 36,356,191 31,927,156
----------- -----------
Income before income taxes.......... 995,213 342,644
Provision for
income taxes.................... 71,000 75,000
----------- -----------
Net income.......................... $ 924,213 $ 267,644
=========== ===========
Net income per share:
Primary $ .31 $ .10
=== ===
Fully diluted $ .30 $ .09
=== ===
Weighted average number of shares used in computing net income per share:
Primary 2,950,071 2,788,299
Fully diluted 3,073,714 2,893,889
See Notes to (Condensed) Consolidated Financial Statements.
3
<PAGE>
VICON INDUSTRIES, INC. AND SUBSIDIARIES
(CONDENSED) CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS 6/30/97 9/30/96
CURRENT ASSETS
Cash............................................ $ 105,224 $ 205,876
Accounts receivable (less allowance
of $476,000 at June 30, 1997 and
$396,000 at September 30, 1996)............... 9,520,565 8,635,020
Other receivables............................... 137,180 71,819
Inventories:
Parts, components, and materials.............. 4,066,423 2,175,408
Work-in-process............................... 2,697,957 1,391,552
Finished products............................. 11,566,399 11,135,798
----------- -----------
18,330,779 14,702,758
Prepaid expenses................................ 376,881 529,631
----------- -----------
TOTAL CURRENT ASSETS............................ 28,470,629 24,145,104
- --------------------
Property, plant and equipment, net.............. 3,570,573 3,034,185
Other assets.................................... 954,116 905,327
----------- -----------
TOTAL ASSETS.................................... $32,995,318 $28,084,616
- ------------ =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Borrowings under revolving credit agreement..... $ 785,060 $ 959,583
Current maturities of long-term debt............ 172,163 203,719
Accounts payable:
Related party................................. 8,158,934 7,457,482
Other......................................... 2,251,814 1,811,730
Accrued wages and expenses...................... 1,949,809 1,229,087
Income taxes payable............................ 95,601 87,205
Deferred gain on sale and leaseback............. - 332,100
------------ -----------
TOTAL CURRENT LIABILITIES 13,413,381 12,080,906
- -------------------------
Long-term debt:
Related party................................. 1,800,000 2,262,005
Other......................................... 7,159,284 4,166,881
Deferred gain on sale and leaseback............. - 101,893
Other long-term liabilities..................... 458,094 504,776
SHAREHOLDERS' EQUITY
Common stock, par value $.01.................... 28,027 28,027
Capital in excess of par value.................. 9,394,163 9,423,089
Retained earnings (deficit)..................... 640,602 (283,611)
------------ -----------
10,062,792 9,167,505
Less Treasury stock 25,400 shares, at cost...... - (82,901)
Foreign currency translation adjustment......... 101,767 (116,449)
------------ -----------
TOTAL SHAREHOLDERS' EQUITY 10,164,559 8,968,155
- -------------------------- ------------ -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY...... $ 32,995,318 $28,084,616
- ------------------------------------------ ============ ===========
See Notes to (Condensed) Consolidated Financial Statements.
4
<PAGE>
VICON INDUSTRIES, INC. AND SUBSIDIARIES
(CONDENSED) CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
6/30/97 6/30/96
Cash flows from operating activities:
Net income................................... $ 924,213 $ 267,644
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization.............. 587,666 516,834
Amortization of sale and leaseback......... (433,993) (249,075)
Unrealized foreign exchange gain........... (39,896) (33,749)
Change in assets and liabilities:
Accounts receivable.......................... (791,969) (747,546)
Other receivables............................ (65,361) 36,930
Inventories.................................. (3,534,235) (3,128,810)
Prepaid expenses............................ 162,986 (70,221)
Other assets................................. (48,789) (59,235)
Accounts payable............................ 1,122,442 2,232,871
Accrued wages and expenses................... 708,692 (520,030)
Income taxes payable......................... 4,020 (2,484)
Other liabilities........................... (46,682) (31,176)
--------- ---------
Net cash used in operating activities..... (1,450,906) (1,788,047)
--------- ---------
Cash flows from investing activities:
Capital expenditures, net of
minor disposals........................... (771,553) (352,918)
--------- ----------
Net cash used in investing activities.... (771,553) (352,918)
--------- ----------
Cash flows from financing activities:
Net borrowings under new credit and
security agreement......................... 2,065,139 3,976,344
Repayments of U.S. revolving credit
agreement.................................. - (2,800,000)
Borrowings under U.K. term loan............... 830,000 -
Repayment of mortgage loan to related party.. (353,112) (140,845)
Repayment of promissory note to related party (200,000) -
(Decrease) increase in borrowings under U.K.
revolving credit agreement................. (226,766) 7,782
Repayments of other debt..................... (79,912) (60,913)
---------- ----------
Net cash provided by
financing activities...................... 2,035,349 982,368
---------- ---------
Effect of exchange rate changes on cash.......... 86,458 46,533
---------- ----------
Net decrease in cash............................. (100,652) (1,112,064)
Cash at beginning of year........................ 205,876 1,151,850
---------- ----------
Cash at end of period............................ $ 105,224 $ 39,786
========== ==========
Non-cash investing and financing activities:
Capital lease obligations.................... $ 276,624 $ -
See Notes to (Condensed) Consolidated Financial Statements.
5
<PAGE>
VICON INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO (CONDENSED) CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1997
Note 1: Basis of Presentation
The accompanying unaudited (condensed) consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and the instructions to Form 10-Q and Rule 10-01
of Regulation S-X. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the nine months ended June 30, 1997 are not
necessarily indicative of the results that may be expected for the fiscal year
ended September 30, 1997. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K for the fiscal year ended September 30, 1996.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
Three Months Ended June 30, 1997 Compared with June 30, 1996
Net sales for the quarter ended June 30, 1997 were $13.7 million compared with
$10.9 million in the corresponding quarter last year. The increase was
principally due to increased sales of engineered systems and equipment. Order
intake for the quarter was $13.3 million. Unfilled orders were $4.4 million at
June 30, 1997.
Gross profit margins for the current quarter were 28.5% compared with 25.1% in
the corresponding quarter last year. The margin increase was due to lower costs
for certain products and growing sales of new higher margin products.
Operating expenses for the current quarter increased to $3.0 million compared
with $2.5 million in the corresponding quarter last year. The increase was due
principally to higher selling costs. Interest expense increased approximately
$100,000 to $309,000 for the current year quarter as a result of increased bank
borrowings to support higher working capital needs.
The increase in current quarter pretax income of approximately $493,000 was
principally due to higher sales and gross profit margins, offset in part by
increased operating expenses.
Results of Operations
Nine Months Ended June 30, 1997 Compared with June 30, 1996
Net sales for the nine months ended June 30, 1997 were $37.4 million compared
with $32.3 million in the corresponding period last year. The increase was
principally due to increased sales of engineered systems and equipment. Order
intake for the nine months was $38.7 million.
Gross profit margins for the nine months were 28.1% compared with 25.4% in the
corresponding period last year. The margin improvement was due to lower costs
for certain products and growing sales of new higher margin products.
Operating expenses increased to $8.7 million compared with $7.3 million in the
corresponding period last year due to higher selling and product promotion
costs. The Company also incurred $225,000 of moving expenses to relocate its
U.S. headquarters to a new facility. Interest expense increased by $205,000 to
$834,000 as a result of increased bank borrowings to support higher working
capital needs.
During the current period, the Company recorded an unrealized foreign exchange
gain of $40,000 compared with a $34,000 gain in the corresponding period last
year. Such gains result from the revaluation of a yen denominated mortgage note
into U.S. dollars.
The increase in current period pretax income of $653,000 was due to higher sales
and gross margins, offset in part by increased operating expenses.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
LIQUIDITY AND FINANCIAL CONDITION
June 30, 1997 Compared with September 30, 1996
Working capital increased approximately $3.0 million to $15.1 million at June
30, 1997 principally as a result of increased bank borrowings used to finance
higher inventory levels.
Accounts receivable increased approximately $.9 million to $9.5 million at June
30, 1997, as a result of higher sales levels. Inventories increased $3.6 million
to $18.3 million at June 30, 1997 due principally to increased levels of parts
and work-in-process for a new line of domed camera products. Total accounts
payable increased $1.1 million to approximately $10.4 million at June 30, 1997
in order to finance the higher inventory levels.
The Company maintains an overdraft facility of 600,000 pounds sterling
(approx. $996,000) in the U.K. to support working capital requirements. At June
30, 1997, borrowings under this agreement were approximately $785,000.
In February, 1997, the Company's bank loan agreement was amended to increase
maximum borrowings from $5.5 million to $6.5 million, subject to an availability
formula based on accounts receivable and inventories. Further, the term of the
agreement was extended to January 31, 1999. Borrowings under such agreement
amounted to approximately $6.2 million at June 30, 1997 compared with $4.1
million at September 30, 1996. The increase was used principally to finance
higher inventory levels and capital additions. Concurrent with the foregoing
amendment, a $2,000,000 secured promissory note with Chugai Boyeki Co., Ltd., a
related party, was modified to require installments of $200,000 upon execution,
$360,000 in July 1998 and the balance of $1,440,000 upon maturity in July 1999.
In April 1997, the Company repaid its U.K. related party mortgage loan with the
proceeds of a new ten year 500,000 pound sterling (approx. $830,000) bank term
loan. The term loan is payable in equal monthly installments with interest at a
fixed rate of 9%. The Company believes that its bank loan agreements and other
sources of credit provide adequate funding to meet its near term cash
requirements.
8
<PAGE>
PART II
ITEM 1 - LEGAL PROCEEDINGS
The Company has no material outstanding litigation.
ITEM 2 - CHANGES IN SECURITIES
None
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5 - OTHER INFORMATION
None
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
No Form 8-K was required to be filed during the current quarter.
EXHIBIT
NUMBERS DESCRIPTION
10 Material Contracts
(.1) Advice of borrowing terms between the Registrant
and National Westminster Bank PLC dated April 22,
1997.
(.2) Commercial fixed rate loan agreement between the
Registrant and National Westminster Bank PLC
dated April 8, 1997.
9
<PAGE>
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
August 13, 1997
VICON INDUSTRIES, INC.
Kenneth M. Darby Arthur D. Roche
President Executive Vice President
Chief Executive Officer Chief Financial Officer
10
<PAGE>
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
August 13, 1997
VICON INDUSTRIES, INC.
VICON INDUSTRIES, INC.
Kenneth M. Darby Arthur D. Roche
Kenneth M. Darby Arthur D. Roche
President Executive Vice President
Chief Executive Officer Chief Financial Officer
10
<PAGE>
ADVICE OF BORROWING TERMS Ref. KM RM03
BRANCH/UNIT. National Westminster Bank PLC
4th Floor, Society Building,
176 London Road, Portsmouth, P02 9DR
DATE- 22 April 1997,
BORROWER'S NAME: VICON INDUSTRIES (UK) LIMITED
Brunel Way, Fareham, Hants P015 5TX
(This letter replaces the Advice of Borrowing Terms letter dated 18 March 1997)
Subject to the Bank's rights below and subject to the Bank's rights under the
'General terms upon which the Bank makes facilities available', it is the Bank's
current intention that the facilities specified in this 'Advice of Borrowing
Terms' (except for those facilities which are subject to their own separate
facility documentation covered below under 'Facilities subject to separate
documentation') should remain available until 28 February 1998.
FACILITY 1:
Facility Type; Overdraft.
Amount: 6oo,ooo.Pounds Sterling
Purpose: Working capital requirements.
Repayment: Fully fluctuating.
lst Debit Interest Rate: 2 percent per annum. above NatWest's Base Rate from
time to time.
2nd Debit interest Rate: (Applicable above 600,000 Pounds Sterling) 5 percent
above Base Rate.
Payable: Quarterly.
1
<PAGE>
REPAYMENT:
It is the Banks current intention that the facilities should be reviewed by the
dates indicated herein, However, all, amounts outstanding under the facilities
are repayable on demand, which may be made by the Bank at its sole discretion at
any time. The facilities may also, by notice, be withdrawn, reduced or made
subject to further conditions or otherwise varied.
INTEREST:
All rates specified above are variable. If the interest rate specified above is
not linked to the Bank's Base Rate, interest will be charged initially at the
rate per annum specified above, which may vary from time to time at the Bank's
absolute discretion. Details of the current rates are available from the branch
or office where the facility is provided.
Interest on any indebtedness from time to time in excess of agreed facilities
will be charged at the interest rate detailed above, An excess fee will be
charged at the Bank's published rate from time to time (currently 3.50 pounds
sterling per day) for each day that your agreed overdraft limit is exceeded .
The Bank is not obliged to allow (or to continue to allow) any such excess
borrowing,
The Bank may alter the basis upon which interest is calculated (including the
size of the margin charged over the Bank's Base Rate or other published rate) on
facilities and/or the amount of any regular repayments of facilities which are
repayable on dernand (or by notice), but it will give the customer one month's
notice before doing so.
OTHER FACILITIES:
Facility Type: Forward Exchange Liability.
Amount: 400,000 pounds sterling (represents 20 percent of contract).
Facility Type: Terminable Indemnities (T/I).
Amount: 200,000 pounds sterling (P/S).
Purpose: HM Customs & Excise Duty Deferment Bond.
Facility Type: Inward Collections - Documents Release in Trust
2
<PAGE>
Amount: 20,000 pounds sterling (P/S).
These facilities may by notice be withdrawn, reduced or made subject to further
conditions or otherwise varied.
SECURITY:
The Bank continues to rely on its existing security (and requires additional
security where specified.) detailed below for the discharge on demand of all
present and future liabilities (both actual and contingent) of the Borrower(s)
to the Bank. The liabilities secured will include without limitation, all
liabilities, of the Borrower to the Bank under the facility or facilities
specified in this Advice of Borrowing Terms including those which are listed
below under the heading 'Facilities subject to separate documentation',
From time to time the Bank may wish to revalue the security, and the cost of any
valuations required by the Bank will be met by the Borrower. Further information
is included in the 'General terms upon which the Bank makes facilities
available'.
Date Executed/New Title of Security Asset
6.7.1989 Guarantee 1,000,000P/S Given by Vicon Industries Inc.
17.10.1990 Mortgage Debenture Capturing all assets of the
company.
To Come First Legal Mortgage Site P3, Brunel Way,
Segensworth Industrial Estate.
FEES:
Type: Overdraft renewal fee.
Amount: 1,850 P/S (from account 01144642 560064).
Date to be debited: Was paid 27 March 1997.
OTHER CONDITIONS:
Please continue to provide monthly management accounts in the existing
format, together with aged debtor profile.
Lending formula to continue whereby debtors less than 90 days plus stock
(minus preferentials) to cover overdraft by 250%, with backup formula of
debtors alone less than 90 days to provide 150 percent cover.
3
<PAGE>
FACILITIES SUBJECT TO SEPARATE DOCUMENTATION
Facility Type: Commercial Fixed Rate Loan .
Amount: 500,000 POUNDS STERLING (P/S). Drawndown 14 April 1997
Per Form of Acceptance signed 8 April 1997
GENERAL TERMS:
Please note that all facilities specified in this 'Advice of Borrowing Terms'
are made available subject to the 'General terms upon which the Bank makes
facilities available', except for those subject to separate facility
letters/agreement forms which do not expressly incorporate the General Terms.
Please note that all facilities are also subject to any terms which may be
implied by English Law.
J F Mclellan
Corporate Manager
The Borrower confirms acceptance of the above terms and conditions pursuant to a
Resolution of the Board of Directors on 30-04-97.
BORROWERS SIGNATURE
For and on behalf of
Vicon Industries (UK) Limited
30-04-97 Date
4
EAST SOLENT CORPORATE BUSINESS CENTRE 3rd & 4th Floors Telephone:01705 665060
Portsmouth Corporate Office Society Building Facsimile:01705 666858
176 London Road
North End
PORTSMOUTH
Your ref: Hants
Our ref. CCM MR Tue P029DR
STRICTLY PRIVATE & CONFIDENTIAL
C Wall Esq
Managing Director
Vicon Industries (UK) Limited
Brunel Way
Fareham NATWEST
Hants P015 5TX
8 April 1997
Dear Mr Wall
CUSTOMER FIXED RATE LOAN AGREEMENT DATED 24 MARCH 1997
We refer to the Commercial Fixed Rate Loan Agreement dated 24 March 1997 which
we have entered into with you (the "Agreement").
Words which are defined in the Agreement have the same meaning when used in
this Letter.
Subject to the terms of the Agreement, you are entitled to ask us to provide a
Quotation to you in connection with the Agreement.
In consideration of you paying to us a fee of 275 pounds sterling (P/S) on or
before 14 April 1997, we hereby agree that:
the fixed rate of interest specified in the Quotation for the whole period
of the Loan shall not be greater than 9 per cent per year (the "Maximum
Agreed Rate")
You may only accept our offer if you are able to satisfy all the terms and
conditions contained within this letter and you can, of course, only draw the
Loan if you satisfy all the terms and conditions in the Agreement.
The Maximum Agreed Rate is only available for the lesser of:
the period of 7 days from the date of this letter; and
the period within which you must draw the Loan under the Agreement.
Our offer contained in this letter relates solely to the rate of interest
specified in our Quotation which may be made by us pursuant to the Agreement
and not to any other offer of facilities by us to you.
<PAGE>
The fee of 275 pounds sterling (P/S) payable to us by you pursuant to paragraph
4 of this letter is in addition to any fees which are payable to you under the
Agreement and is not refundable by us to you in the event that you do not draw
the Loan.
Acceptance of our offer to You may only be effected by the receipt by us of the
fee specified in paragraph 4 of this letter together with the following items
which must, in form and substance, be satisfactory us.
a signed copy of this letter signed for and on your behalf
a certified copy of a resolution of your board of directors authorising
acceptance of our offer
a certified copy of your memorandum and articles of association
This letter is governed by the laws of England.
Yours sincerely
TIM BLEATHMAN
Corporate Manager
For and on behalf of
National Westminster Bank PLC
<PAGE>
Form of Charge Filed at HM Land Registry Under Reference MD436N ID: C041410
NWB1115 (Revised May 1995) Legal Mortgage of land by individual(s) or company
(with provision for commercial use)
This Legal Mortgage is dated 9th April 1997
and is made between
Vicon Industries (UK) Limited (Reg No 1551194) whose Registered Office is
situate at Site P3 Brunel Way Segensworth Industrial Estate Segensworth East
Fareham Hampshire
(the Mortgagor) of the one part and National Westminster Bank Pic (the Bank) of
the other part whose address for service of any documents relating to this Legal
Mortgage is its Branch at
Solent Securities Centre 3rd Floor Arndale House 243 High Street North Poole
Dorset BH15 1BD
or such other address as the Bank may notify the Mortgagor of in writing from
time to time.
Description of the leasehold property to be mortgaged Address:
Site P3 Brunel Way Segensworth Industrial Estate Segensworth East
Fareham Hampshire
Registered land
Title number(s) County/London Borough
HP401658 Hampshire / Fareham
Unregistered land
The property is comprised in the following documents:
Date Description (Conveyance Parties
Lease Assignment Assent etc)
<PAGE>
ID : C041410
1 If the expression "the Mortgagor" includes more than one person it shall be
construed as referring to all and/or any one or more of those persons and their
obligations shall be joint and several.
2 (a) The Mortgagor with full title guarantee charges by way of legal mortgage
all and every interest in or over the property described above which the
Mortgagor now or hereafter has power so to charge and charges in equity all
other interests therein (the Mortgaged Property) and the proceeds of We thereof
and charges to the Bank all moneys to be received under any policy of insurance
effected in respect of the Mortgaged Property as a continuing security to the
Bank for the discharge on demand of:-
(i) all present and/or future indebtedness of the Mortgagor to the Bank
on any current and/or other account vath interest and bank charges
and
(ii) all other liabilities whatsoever of the Mortgagor to the Bank
present future actual and/or contingent and
(iii) all costs charges and expenses howsoever incurred by the Bank in
relation to .this Mortgage and such indebtedness and/or liabilities
on a full indemnity basis
and for the payment of interest on the foregoing day by day from demand until
full discharge (as well after as before judgment) at the rate payable or deemed
to be payable by the Mortgagor. Such interest will be calculated and compounded
as agreed or in such manner as the Bank may reasonably determine from time to
time.
The costs and expenses referred to herein shall include (for avoidance of doubt)
all amounts the Bank may from time to time require to compensate it for its
internal management and administrative costs and expenses incurred in connection
with the enforcement of this Mortgage and recovery of the liabilities secured by
it. In the absence of manifest error a certificate signed by an officer of the
Bank as to the amount of such costs and expenses incurred by the Bank from time
to time shall for all purposes be conclusive evidence (and admissible as such)
against and binding upon the Mortgagor.
(b) If the Mortgagor is a company the Mortgagor with full title guarantee also
charges by way of floating security all movable plant machinery implements
utensils furniture and equipment building and other materials goods and other
effects now and from time to time placed on or used in or about the Mortgaged
Property (the Charged Effects) with the discharge on demand of all moneys costs
and interest as aforesaid and the expression "the Mortgaged Property" shall be
construed accordingly.
(c) The Mortgagor with full title guarantee hereby assigns unto the Bank all
that the goodwill and connection of any business or businesses from time to time
carried on in or upon the Mortgaged Property or any part or parts thereof and
the full benefit of all licences (which expression shall also include any
registrations) held in connection with such business(es) subject to redemption
on payment of all liabilities hereby secured and the expression "the Mortgaged
Property" shall be construed accordingly. The Mortgagor will take out and
maintain all necessary licences for the due carrying on of such business(es) and
will not do or suffer to be done any act matter or thing whereby any such
licences may be lost or not renewed and will (to the fullest extent possible) at
all times at the Mortgagor's cost execute all such instruments and do all such
things as shall be requisite for transferring and vesting all or any such
licences to and in the nominee(s) of the Bank or any other person(s) as the Bank
may direct and the of the Mortgagor hereby irrevocably and by way of security
appoints the Bank to be the attorney of the Mortgagor in the name of the
Mortgagor to apply for and obtain the renewal of any such licences and to sign
all proper notices and other documents and to do all necessary acts for
assigning or transferring all or any such licences to such person(s) as the Bank
may think fit. Without prejudice to the above the Mortgagor consents to the
making of any protection order in respect of the Mortgaged Property or any part
or parts thereof to such person or persons as the Bank or any Receiver appointed
hereunder may specify and/or the transfer of any such licence as aforesaid and
agrees that this Mortgage may be produced (and shall be admissible) as evidence
of such consent.
3 The Mortgagor will keep the Mortgaged Property in a good state of repair and
condition and will keep it insured against such risks and with such office and
for such amounts as the Bank may from time to time approve. If the Mortgagor
fails to maintain or insure the Mortgaged Property the Bank may do so at the
expense of the Mortgagor without thereby becoming a mortgagee in possession.
4 Section 103 of the Law of Property Act 1925 shall not apply to this Mortgage
and the statutory power of sale and other powers shall be exercisable at any
time after demand.
5 If the Mortgagor is not a company (or to the extent that the charge expressed
to be created by Clause 2(b) is ineffective) and in the event of the Bank taking
possession of the Mortgaged Property then without prejudice to Clause 7 below
the Bank is hereby authorised as agent for the Mortgagor to remove store sell or
otherwise deal with any furniture or goods whatsoever which the Mortgagor shall
fail or refuse to remove from the Mortgaged Property within seven days of being
requested so to do by notice from the Bank and the Bank shall not be liable for
any loss or damage occasioned to the Mortgagor. The Mortgagor shall indemnify
the Bank against all expenses incurred by the Bank in relation to such furniture
or goods and the Bank shall account to the Mortgagor for the proceeds of any
such sale after deducting any such expenses.
6 The statutory powers of leasing or of accepting surrenders of leases conferred
on mortgagors shall not be exercised by the Mortgagor nor shall the Mortgagor
pan with possession of the Mortgaged Property or any part thereof nor confer
upon any person firm company or body whatsoever any licence right or interest to
occupy the Mortgaged Property or any part thereof without the consent in writing
of the Bank but the Bank may grant or accept surrenders of leases without
restriction.
<PAGE>
7(a) At any time after the power of sale has become exercisable the Bank may by
writing under the hand of any Manager of the Bank appoint any person or persons
to be receiver(s) of the Mortgaged Property or any part or parts thereof (a
Receiver). The Bank and/or any Receiver appointed hereunder may (without
prejudice to any other powers howsoever conferred) enter the Mortgaged
Property., or any part(s) thereof (whether or not any income is arising
therefrom) and shall (severally) have full power (i) to do any act or deed
whatsoever (in the case of the Bank and any Receiver for and in the name of or
on behalf of the Mortgagor or in the case of the Bank as Mortgagee) in relation
to or in connection therewith which the Mortgagor was (or might have been)
capable of doing and irrespective of the Mortgagor's death insolvency or
incapacity and treating the Mortgagor conclusively as sole legal and beneficial
owner (including (without limitation) power to manage build complete layout
repair cleanse develop use deal with apply for registration permissions and
licences equip furnish get-in receive and collect moneys arising sell give
effective receipts exchange lease licence sub-lease surrender and accept
surrender of leases convey assign transfer covenant exercise statutory rights
insure litigate contract compromise employ agents and servants and provide
services) and (ii) to conduct any business carried on or in the opinion of the
Bank or any Receiver capable of being carried on in or from the Mortgaged
Property and shall in connection therewith have all of the powers referred to
above. Any expenditure incurred in so doing shall be immediately repayable by
the Mortgagor with interest at the rate aforesaid and shall be a liability
charged on the Mortgaged Property in priority to all other sums secured thereon.
The Bank and any Receiver may utilise any moneys from time to time received for
the purpose of financing any expenditure or costs at any time incurred in
connection with the exercise of any powers hereby or otherwise conferred in
advance of any other payments or application (whether under Section 109(8) of
the Law of Property Act 1925 of otherwise), Any Receiver may
D
<PAGE>
ID : C041410
1 If the expression "the Mortgagor" includes more than one person it shall be
construed as referring to all and/or any one or more of those persons and their
obligations shall be joint and several.
2 (a) The Mortgagor with full title guarantee charges by way of legal mortgage
all and every interest in or over the property described above which the
Mortgagor now or hereafter has power so to charge and charges in equity all
other interests therein (the Mortgaged Property) and the proceeds of We thereof
and charges to the Bank all moneys to be received under any policy of insurance
effected in respect of the Mortgaged Property as a continuing security to the
Bank for the discharge on demand of:-
(i) all present and/or future indebtedness of the Mortgagor to the Bank
on any current and/or other account vath interest and bank charges
and
(ii) all other liabilities whatsoever of the Mortgagor to the Bank
present future actual and/or contingent and
(iii) all costs charges and expenses howsoever incurred by the Bank in
relation to .this Mortgage and such indebtedness and/or liabilities
on a full indemnity basis
and for the payment of interest on the foregoing day by day from demand until
full discharge (as well after as before judgment) at the rate payable or deemed
to be payable by the Mortgagor. Such interest will be calculated and compounded
as agreed or in such manner as the Bank may reasonably determine from time to
time.
The costs and expenses referred to herein shall include (for avoidance of doubt)
all amounts the Bank may from time to time require to compensate it for its
internal management and administrative costs and expenses incurred in connection
with the enforcement of this Mortgage and recovery of the liabilities secured by
it. In the absence of manifest error a certificate signed by an officer of the
Bank as to the amount of such costs and expenses incurred by the Bank from time
to time shall for all purposes be conclusive evidence (and admissible as such)
against and binding upon the Mortgagor.
(b) If the Mortgagor is a company the Mortgagor with full title guarantee also
charges by way of floating security all movable plant machinery implements
utensils furniture and equipment building and other materials goods and other
effects now and from time to time placed on or used in or about the Mortgaged
Property (the Charged Effects) with the discharge on demand of all moneys costs
and interest as aforesaid and the expression "the Mortgaged Property" shall be
construed accordingly.
(c) The Mortgagor with full title guarantee hereby assigns unto the Bank all
that the goodwill and connection of any business or businesses from time to time
carried on in or upon the Mortgaged Property or any part or parts thereof and
the full benefit of all licences (which expression shall also include any
registrations) held in connection with such business(es) subject to redemption
on payment of all liabilities hereby secured and the expression "the Mortgaged
Property" shall be construed accordingly. The Mortgagor will take out and
maintain all necessary licences for the due carrying on of such business(es) and
will not do or suffer to be done any act matter or thing whereby any such
licences may be lost or not renewed and will (to the fullest extent possible) at
all times at the Mortgagor's cost execute all such instruments and do all such
things as shall be requisite for transferring and vesting all or any such
licences to and in the nominee(s) of the Bank or any other person(s) as the Bank
may direct and the of the Mortgagor hereby irrevocably and by way of security
appoints the Bank to be the attorney of the Mortgagor in the name of the
Mortgagor to apply for and obtain the renewal of any such licences and to sign
all proper notices and other documents and to do all necessary acts for
assigning or transferring all or any such licences to such person(s) as the Bank
may think fit. Without prejudice to the above the Mortgagor consents to the
making of any protection order in respect of the Mortgaged Property or any part
or parts thereof to such person or persons as the Bank or any Receiver appointed
hereunder may specify and/or the transfer of any such licence as aforesaid and
agrees that this Mortgage may be produced (and shall be admissible) as evidence
of such consent.
3 The Mortgagor will keep the Mortgaged Property in a good state of repair and
condition and will keep it insured against such risks and with such office and
for such amounts as the Bank may from time to time approve. If the Mortgagor
fails to maintain or insure the Mortgaged Property the Bank may do so at the
expense of the Mortgagor without thereby becoming a mortgagee in possession.
4 Section 103 of the Law of Property Act 1925 shall not apply to this Mortgage
and the statutory power of sale and other powers shall be exercisable at any
time after demand.
5 If the Mortgagor is not a company (or to the extent that the charge expressed
to be created by Clause 2(b) is ineffective) and in the event of the Bank taking
possession of the Mortgaged Property then without prejudice to Clause 7 below
the Bank is hereby authorised as agent for the Mortgagor to remove store sell or
otherwise deal with any furniture or goods whatsoever which the Mortgagor shall
fail or refuse to remove from the Mortgaged Property within seven days of being
requested so to do by notice from the Bank and the Bank shall not be liable for
any loss or damage occasioned to the Mortgagor. The Mortgagor shall indemnify
the Bank against all expenses incurred by the Bank in relation to such furniture
or goods and the Bank shall account to the Mortgagor for the proceeds of any
such sale after deducting any such expenses.
6 The statutory powers of leasing or of accepting surrenders of leases conferred
on mortgagors shall not be exercised by the Mortgagor nor shall the Mortgagor
pan with possession of the Mortgaged Property or any part thereof nor confer
upon any person firm company or body whatsoever any licence right or interest to
occupy the Mortgaged Property or any part thereof without the consent in writing
of the Bank but the Bank may grant or accept surrenders of leases without
restriction.
7(a) At any time after the power of sale has become exercisable the Bank may by
writing under the hand of any Manager of the Bank appoint any person or persons
to be receiver(s) of the Mortgaged Property or any part or parts thereof (a
Receiver). The Bank and/or any Receiver appointed hereunder may (without
prejudice to any other powers howsoever conferred) enter the Mortgaged
Property., or any part(s) thereof (whether or not any income is arising
therefrom) and shall (severally) have full power (i) to do any act or deed
whatsoever (in the case of the Bank and any Receiver for and in the name of or
on behalf of the Mortgagor or in the case of the Bank as Mortgagee) in relation
to or in connection therewith which the Mortgagor was (or might have been)
capable of doing and irrespective of the Mortgagor's death insolvency or
incapacity and treating the Mortgagor conclusively as sole legal and beneficial
owner (including (without limitation) power to manage build complete layout
repair cleanse develop use deal with apply for registration permissions and
licences equip furnish get-in receive and collect moneys arising sell give
effective receipts exchange lease licence sub-lease surrender and accept
surrender of leases convey assign transfer covenant exercise statutory rights
insure litigate contract compromise employ agents and servants and provide
services) and (ii) to conduct any business carried on or in the opinion of the
Bank or any Receiver capable of being carried on in or from the Mortgaged
Property and shall in connection therewith have all of the powers referred to
above. Any expenditure incurred in so doing shall be immediately repayable by
the Mortgagor with interest at the rate aforesaid and shall be a liability
charged on the Mortgaged Property in priority to all other sums secured thereon.
The Bank and any Receiver may utilise any moneys from time to time received for
the purpose of financing any expenditure or costs at any time incurred in
connection with the exercise of any powers hereby or otherwise conferred in
advance of any other payments or application (whether under Section 109(8) of
the Law of Property Act 1925 of otherwise), Any Receiver may
<PAGE>
borrow and/or secure the payment of money which may be required for the exercise
of any of the powers hereby or otherwise conferred in such manner (including the
creating of new legal charges of the Mortgaged Property whether or not having
priority to this Mortgage) as may be considered expedient. Neither the Bank nor
any Receiver shall be liable to the Mortgagor as mortgagee in possession or
otherwise for any loss howsoever occurring in the exercise of any such powers
and any Receiver shall be the agent of the Mortgagor (who shall be solely
responsible for his acts defaults and remuneration). Section 109(6) of the said
Act shall apply as though the words "not exceeding five per centum of the gross
amount of all money received" were omitted. The Mortgagor hereby irrevocably
appoints the Bank and any Receiver as agents and attorneys to exercise
(severally) any of the said powers. The powers of attorney hereby given are
given by way of security. The powers hereby conferred may also be exercised by
any substitute or delegate appointed in writing by the Bank or any Receiver or
by any attorney of any of them or by any substitute or delegate appointed in
writing by any such attorney for and in the name and on behalf of the Mortgagor
the Receiver or the Bank as the case may be and any such exercise by any such
substitute delegate or attorney shall be treated by the Mortgagor and the Bank
and shall be effective in all respects as an exercise by the Bank or by the
Receiver as the case may be. The Bank and any Receiver (including any substitute
delegate or attorney as aforesaid) in connection with any powers howsoever
conferred may do all acts and things and execute all such deeds and sign all
such agreements or enter into or make all such arrangements as may be required
of as they may consider necessary or desirable in relation to the exercise of
any such powers.
(b) If the Mortgagor is not a company then the Mortgagor hereby (i) grants an
irrevocable licence to the-Bank and to any Receiver until the sale of the
Mortgaged Property to use all the assets of the Mortgagor situated at the
Mortgaged Property which are used in connection vath any business of the
Mortgagor carried on at the Mortgaged Property and (ii) further irrevocably
authorises the Bank and/or any Receiver to remove sell store or otherwise deal
with the same and to pay any net proceeds of sale after deduction of any costs
and expenses relating thereto to the Bank which shall account to the Mortgagor
for the proceeds of any such sale aftw deducting any such expenses.
8 If the Bank receives or is deemed to be affected by notice whether actual or
constructive of any subsequent charge or other interest affecting any part of
the Mortgaged Property and/or the proceeds of sale thereof and/or any other
property hereby charged the Bank may open a new account or accounts with any
person for whose liabilities this Mortgage is available as security. N the Bank
does not open a new account it shall nevertheless be treated as if it had done
so at the time when it received or was deemed to have received notice and as
from that time all payments made to the Bank shall be credited or be treated as
having been credited to the new account and shall not operate to reduce the
amount for which this Mortgage is security.
9 In case the Mortgagor shall have more than one account with the Bank it shall
be lawful for the Bank at any time and without any prior notice forthwith to
transfer all or any part of any balance standing to the credit of any such
account (whether current or otherwise or subject to notice or not) to any other
such account which may be in debit but the Bank shall notify the Mortgagor of
the transfer having been made. If any credit balance is in a different currency
from any debit balance the Bank shall be entitled to utilise currency of the
credit balance for the purchase at its spot rate of exchange of an amount in the
currency of the debt balance not exceeding the amount of such debit balance and
also to pay out of the credit balance any additional sum which the Bank may be
required to pay for such currency.
10 None of the persons included in the expression 'the Mortgagor" shall as
against the Bank be entitled to any of the rights or remedies legal or equitable
of a surety as regards the indebtedness or liabilities of any of the other
persons included in the expression "the Mortgagor".
11 A demand or notice hereunder shall be in writing signed by an officer or
agent of the Bank and may be served on the Mortgagor by hand or by post or by
facsimile machine (fax). In the case of a company service by hand may be made
either by delivering the same to any officer of the company at any place or
leaving the same addressed to the company at its registered office or place of
business last known to the Bank. A demand or notice by post or by fax may be
addressed to the Mortgagor at the registered office address or place of business
last known to the Bank and shall be deemed to have been received if posted two
days after the day on which it was posted and if sent by fax at the time of
transmission. It shall be effective notwithstanding it be returned undelivered
and notwithstanding the death of the Mortgagor. The Bank may use the last fax
number of the Mortgagor known to it and transmission may be proved by production
of an activity or transmission report which purports to indicate the
transmission of a message to such a number.
12 If the Mortgagor is a company the Mortgagor certifies that this Mortgage does
not contravene any of the provisions of the company's Memorandum and Articles of
Association and has been executed in accordance therewith.
13 This Mortgage shall be governed by and construed in accordance with the Laws
of England.
In Witness whereof this Deed has been executed by the Mortgagor the day and year
first before written.
<PAGE>
ID C041410
Signed as a Deed by the Mortgagor acting by
Director
Name in full
(in block letters)
Director/Secretary*
Name in full
(in block letters)
*delete as applicable
or alternatively:
The Common Seal of
Vicon Industries (UK) Limited
was hereunto affixed
in the presence of
Director
Secretary
I/We acknowledge receipt of a completed copy of this document. If executed by a
company the acknowledgment must be signed by a Director or by the Company
Secretary Secretary
Signature(s)
<PAGE>
ID C041410
Solent Securities Centre
East Solent Corporate Business Centre
Vicon Industries (UK) Limited
Dated 9th April 1997
Vicon Industries (UK) Limited
to
National Westminster Bank Plc
Legal Mortgage
of Leasehold property situate at
Site P3 Brunel Way Segensworth Industrial Estate Segansworth East.
Fareham Hampshire
Chsl018o NWB1115(RevMayl995)
This Release made the day of
One thousand nine hundred and Between
the within-named National Westminster Bank Plc (the Bank) of the one part and
the within-named
of the other part Witnesses that the Bank as Mortgagee hereby releases all and
singular the property now comprised in or charged by the within-written Dead
from all moneys secured by and from all claims and demands under the
Within-written Deed.
In Witness whereof this Deed has been duty executed on behalf of the Bank by its
duly authorised Attorney the day and year first before written.
Signed and Delivered as a Deed by
as the Attorney and on behalf of the Bank
In the presence of
Bank Official Signature of Witness
<PAGE>
COMMERCIAL FIXED RATE LOAN
Agreement
(Company)
We, National Westminster Bank Plc and any person to whom we transfer our
rights or duties under this agreement agree to offer you a loan under the
terms and conditions set out below and on the attached appendix. The
first part of the appendix explains some of the words and phrases used in
this agreement.
1. Date of offer: 24 March 1997
2 Your name- VICON INDUSTRIES (UK) LTD (1551194) Brunel Way,
Segensworth East, Fareham, Hampshire P015 5TX
3 Lending Branch: 130 Commercial Road, Portsmouth, Hampshire PO1 1ES
4 Amount: 500,000 (Five hundred thousand pounds)
5 Purpose of the Loan: To uplift Japanese Yen loan from Chugai Boyeici Co
Ltd and to provide working capital
6 Period of the Loan: 10 years
7 Interest rate
A fixed rate of interest for the whole period of the Loan.(Please see:
- paragraph 4 of the appendix for how we work out the interest; and
- paragraph 5 of the appendix for how we fix the rate of interest.)
(Please see paragraph 4 of the appendix for how we work out interest)
8 Fee: 5,ooo pounds due on the date on which you accept our offer as set out
in paragraph 3 of the appendix.
9 Drawing the Loan; You must draw the loan in full in one amount.
10 Repayment: You must have repaid the Loan in full on the last day of the
period shown in term 6 of this agreement.
Subject always to our rights under paragraph 13 of the appendix,
You will repay the Loan by 120 equal instalments of principal payable
every one month starting one month after the date on which you draw
the Loan.
11 Security:
- First Legal Mortgage over Site P3, Brunel Way, Scgensworth
Industrial Estate, Fareham, Hampshire.
12 Value of Security: The Security shown in term 11 of this agreement
together with any security provided pursuant to paragraph 6 of the
appendix must be worth (calculated according to our own basis of valuation
from time to time) at least 100 percent of the amount which you owe at any
time on the Loan.
13 Financial agreements:
You agree to the following:-
Please see paragraph 2 of the appendix for an explanation of
the words and phrases used below.
a. You will not allow Tangible Net Worth to be less than 450,000 pounds
b. You will not allow Cash Generated to be Less than 100 percent of Debt
Service Costs.
c. You will not allow Profit to be less than 200 percent of Borrowing Costs.
<PAGE>
COMMERCIAL FIXED RATE LOAN
d. You will not, without our prior written consent either create, extend
or increase any security interest on the whole or any part of your or the
Group's undertaking, property or assets (including uncalled capital)
whether present or future. Security interest includes (without limitation)
liens, pledges, charges, mortgages or other encumbrances.
e. You will provide us with such financial and other information relating
to you or to the Group as we may reasonably require including (without
limitation) copies of the audited accounts not later than 5 months after
the end of the accounting period to which they relate.
In order to verify whether you are complying with these covenants, we will
refer to your annual audited accounts'.
14 Overdue payments:
If you do not make any payment under this agreement on the date it is due, then,
without prejudice to our other rights, we will charge interest on the overdue
amount from the date it was due to the date upon which we receive payment (as
well after as before judgement). This will be calculated (and compounded in
accordance with our normal practice) on the basis of a year of 365 days and the
actual number of days elapsed.
You will pay interest to us at a rate which is equal to the sum of:-
5 percent per year; and
our base rate from time to time
Any late payments may be debited to a Separate account.
15 Early Repayment:
Paragraph 8 of the appendix gives details of how you may ask to repay the Loan
before the specified repayment dates. In connection with paragraph 8 of the
appendix, the prepayment fee is 0.5 percent. of the amount which you prepay.
<PAGE>
COMMERCIAL FIXED RATE LOAN
Appendix
1 Agreement
This appendix forms part of the agreement between us.
If we refer to a paragraph, this will mean a paragraph of this appendix. if
we refer to a term this will mean a term of the agreement.
2 Meanings of words and phrases used in this agreement:
the 'Agreement Date' means the date on which our offer Is accepted in the way
set out in paragraph 3 of the appendix.
'Business Day' shall mean a day on which banks in general are open in the City
of London for the transaction of business of the nature set out in this
agreement.
'Event of Default' shall mean any event specified in paragraph 13 of the
appendix.
'the Group' means you and your (of where your Parent is specified in term 2(b),
your Parent and its) subsidiary undertakings (as defined by Section 258 of the
Companies Act 1985) taken as a whole (and, save where the context does not
admit, any of them individually); if there are no subsidiary undertakings for
the time being, references to the Group shall be taken to be references to you
and the word 'consolidated" in relation to any accounts or other financial
matters shall be ignored.
the 'Loan' means the loan facility which we have agreed to provide under the
terms and subject to the conditions of this agreement and, where necessary, it
will mean all amounts owed under this agreement.
'The Offer Date' is the date shown in term 1 of the agreement. This is the date
on which we make the written offer of the Loan.
"your Parent" is the company shown in term 2(b) of the agreement
'Option' means either of the interest rate options shown in term 7 of the
agreement
'Quotation' means a statement from us in response to a request under paragraph 5
of the appendix giving details of a period and an interest rate and any other
terms under which we are willing to provide the Loan.
'The Quotation Date' is the date on which we make a Quotation.
'Security' means the security shown in term 11 of the agreement and any other
security which you provide under paragraph 6 of the appendix.
"Subsidiary Undertaking' shall mean a subsidiary undertaking (as defined by
S.258 of the Companies Act 1985).
The following definitions apply to the financial agreements in term 13 of the
agreement.
'Borrowing Costs' means, in respect of any financial period, all
continuing, regular or periodic costs, charges and expenses
(including but not limited to, interest and any capitalised interest)
incurred by the Group in effecting, servicing or maintaining Total
Borrowing.
'Capital Expenditure' means, in respect of any financial period, the
aggregate expenditure of the Group on the purchase of fixed assets
(as determined in accordance with generally accepted United Kingdom
accounting principles (consistently applied)).
'Cash Generated' means, in respect of any financial period, the sum of:-
- Profit;plus
- an amount equal to the depreciation charged on fixed assets of
the Group during such period and any other non-cash movements; plus
- an amount equal to any decrease in net working capital (being,
in respect of any period, the net surplus (or deficit) of the
aggregate stock in trade of the Group and the
<PAGE>
COMMERCIAL FIXED RATE LOAN
amount owed to members of the Group by debtors less the amount owed by them to
creditors at the end of such period); plus - the proceeds of new ordinary or
other non-redeemable shares issued by you during such period.
LESS the sum of:-
- - an amount equal to tbe tax paid by tbe Group during such period, plus
- - an amount equal to any increase in net working capital (as defined-above)
during such period; plus
- - an amount equal to the Capital Expenditure (including investments) by the
Group during such period less an amount equal to the net proceeds of disposal of
fixed assets during such period; plus
- - an amount equal to the aggregate amount of dividends on ordinary shares paid
by you during such period; plus
- - any receipts of the Group by way of extraordinary items during such period.
'Current Assets' means all assets of the Group which would be classified, in
accordance with generally accepted United Kingdom accounting principles
(Consistently applied) as current assets.
'Current Liabilities' means all liabilities of the Group which would be
classified, in accordance with generally accepted United Kingdom accounting
principles (consistently applied) as current liabilities.
'Debt Service Costs' means, in respect of any financial period:-
(i) all interest, commission, periodic fees and other financial charges payable
by any member of the Group during such period (including the interest element
payable under financial leases); plus
(ii) the aggregate amount of all dividend payments on redeemable Preference
shares (and other redeemable shares) made by you during such period, plus
(iii) the aggregate amount of all debt repayments made by any member of the
Group or due from any member of the Group (including redemption of any
redeemable preference shares) during such period.
'Net Cash Flow before Financing' means in respect of any financial period, the
sum of:-
i. Profit, plus
ii. an amount equal to the depreciation charged on fixed assets of the Group
during such period and any other non-cash movements during such period; plus
iii.an amount equal to any decrease in net working capital (being, in respect of
any period the net surplus (or deficit) of the aggregate stock in trade of
the Group and the amount owed to members of the Group by debtors less the
amount owed by them to creditors at the end of such period);
LESS the sum of:-
i. an amount equal to the tax paid by the Group during such period, plus
ii. an amount equal to any increase in net working capital (as defined above)
during such period, plus
iii. an amount equal to the Capital Expenditure (including investments) by the
Group during such period less an amount equal to the net proceeds of
disposal of fixed assets during such period, plus
iv. an amount equal to the interest paid (less interest received) for such
period, plus
v. an amount equal to the aggregate amount of dividends on ordinary shares
paid by you during such period; plus
vi. any receipts of the Group by way of extraordinary items during such period.
<PAGE>
COMMERCIAL FIXED RATE LOAN
'Net Working Assets' in respect of any period, the.aggregate stock in
trade of the Group and the amounts owed to members of the Group by
trade debtors less the amounts owed by them to trade creditors at the
end of such period.
`Profit' means, in respect of any financial period, the amount of
profit of the Group (excluding profit attributable to minority
interests) before taxation, interest payable, and any unusual,
extraordinary or exceptional items.
`Tangible Net Worth' means the amount the time being paid up or
credited as paid up on your (or, where your Parent is specified in
term 2(b), your Parent's) issued share capital plus all reserves of
the Group which would, in accordance with generally accepted United
Kingdom accounting principles consistently applied be classified as
shareholders capital plus retained earnings of the Group but
deducting assets the Group which would, in accordance with such
principles, be classified as intangible assets.
`Total Borrowing' means the total outstanding principal amount of all
borrowings or monies otherwise raised by the Group from all sources
whatever, whether by way of debenture, mortgage, unsecured loan,
overdraft or in any other manner (including redeemable preference
shares) plus the aggregate face amount of all discounted acceptance
credits.
3 Availability of Loan
From the Offer Date shown in term 1 of the agreement you will have 3O days in
which you can draw the Loan. However, you can only accept this offer and draw
the Loan if we have received the following items from you and are satisfied with
them:-
a) A copy of this agreement with the acceptance form signed on your behalf.
b) A certified copy of a resolution of the board of directors showing that
it
- accepts the terms and conditions of the Loan;
- agrees to give the security set out in term 11 of the agreement; and
- authorises a person or persons to take such other action on your
behalf as may be necessary for the purpose of the agreement.
c) A copy of your Memorandum and Articles of Association certified by your
secretary or a director as being up to date (including copies of all
amending resolutions).
d) The security set out in term 11 of the agreement together with
copies of such certified board resolutions and copies of Memoranda
and Articles of Association from the giver(s) of such security as we
may require.
You must give us three days' notice of your intention to draw the Loan.
These days must be Business Days. We will credit your current account with
the amount of the Loan on the day on which you accept the Quotation.
You may not draw the Loan unto we are satisfied that you have accepted a
Quotation.
Acceptance of the offer contained In this agreement may be effected by
receipt by us at the lending branch (please see term 3 of the agreement)
within thirty days of the date specified In term 1 of the agreement Of the
items specified in this paragraph.
4 Interest
We will work out Interest on the balance of the loan outstanding
from day to day on the basis of the actual number of days elapsed and a 365 day
year.
<PAGE>
COMMERCIAL FIXED RATE LOAN
You must pay interest to us on our usual charging days in March, June,
September and December or by combined interest and principal instalments
(where specified under term 10) on such dates as are specified under term
10 of the agreement.
Option 1:
You will pay a fixed rate of interest for the entire period of the Loan as
specified in your Quotation. This rate of interest will be the rate shown
in the Quotation.
We may charge interest to your current account or to your loan account.
If you do not make any payments on the due date under this agreement, then
the rate of interest specified in term 14 shall apply to any overdue
amounts.
5 Fixed Rate of Interest
You must give us three days notice in writing of the date on which you want
to draw the Loan. All these days must be Business Days
If we have received the items listed in paragraph 3 of this appendix
(within the time period set out there), you may ask for a Quotation at any
time up to 4 p.m. on the required day for the Loan (which must be a
Business Day). You must also tell us the interest rate option you want.
You must accept or reject our Quotation immediately. If you do not accept
the Quotation immediately you shall be deemed to have rejected it.
Once you have accepted the Quotation we will normally send to you written
details of the terms of the Quotation. These details will include the
interest rate and the period for which such rate applies repayment dates
and repayment instalment amounts but if you do not receive these written
details it will not affect your obligations in respect of the Quotation
which you have accepted.
Accepting the Quotation in any way (whether by telephone telex or in any
other way ) shall be binding on you and will mean that you will have to
borrow the full amount of the Loan as set out in this agreement and the
Quotation on the Quotation Date.
If we do not receive instructions from you in relation to the Quotation
which you have accepted we shall be entitled to credit the amount of the
Loan to a current account in your name at the lending branch shown in term
3 of the agreement and you shall be deemed to have drawn the Loan.
6 Security
You must give us the security shown in term 11 of the agreement and this
will be a continuing security for the discharge on demand of all your
indebtedness and your other liabilities to us from time to time.
You undertake to provide any extra security which we need to maintain the
value of the Security at the level specified in term 12 of the agreement
within such period as we may require. The open market value of the Security
shall be determined at our option from time to time by an independent
professional valuation. You will have to pay for this valuation.
7 Fees and Costs
We have the right to debit your current account with the fees set out in
term 8 and 15 of the agreement.
<PAGE>
COMMERCIAL FIXED RATE LOAN
8 Early Repayment
You may repay the Loan early subject to you giving us five business days
irrevocable written notice and subject to you indemnifying us for the breakage
costs and losses sustained or incurred by us as a result of such early
repayment. The breakage costs of such early repayment will until further notice,
be calculated in accordance with the formula provided in the attached schedule
and it is understood that the breakage costs and losses can only be confirmed on
the day early redemption takes place.
On early repayment of the Loan you will also have to pay us the prepayment fee
set out in Term 15 of the agreement.
A certificate by one of our officers as to the amounts due from you under this
paragraph shall, save for manifest error, be conclusive evidence (and admissible
as such) against and binding on YOU.
You cannot reborrow any amount you have pre-paid.
9 Liability
If you are more than one person then the expression "you" shall mean all of such
persons and (save where the context does not so admit) any of them and the
obligation of those persons shall be joint and several.
Each such person irrevocably appoints each other person as his agent for the
service of any demand or notice under this agreement.
10 Current Accounts
You agree to maintain a current account with us throughout the period of the
Loan.
11 Payments
We may transfer amounts from your current account to meet the repayments set out
in term 10 of the agreement.
We may use any repayment instalment (including instalments of principal and
interest) or any part of any repayment instalment to:
- - reduce the amount of principal outstanding on the Loan.
- - pay interest accrued on the Loan.
- - discharge any other payment due under this agreement.
You must make all payments under this agreement In full in pounds sterling
without any deduction or withholding (whether in respect of set-off,
counterclaim, duties, taxes, charges or otherwise howsoever). if you are
compelled by law to make any deduction or withholding, you will promptly pay to
us such additional amounts as will make the net amount received by us equal to
the full amount payable by you had there been no deduction or withholding.
12 Set Off
We shall be entitled to set off against any of your liabilities to us under this
agreement (whether present, future, actual or contingent) any of your credit
balances on any of your accounts with us or in your name. We do not have to give
you any prior notice to do this.
<PAGE>
COMMERCIAL FIXED RATE LOAN
13 Default
If any of the following events occur, we may, by giving you written notice,
cancel our outstanding commitments to you (including the availability of the
Loan if you have not drawn it) and demand immediate repayment of your
indebtedness to us and exercise our rights under any Security:-
(a) If you breach any term or condition (including any covenant) of this
agreement.
(b) If you do not make any payment on the date it is due under this
agreement and whether by way of principal, interest or otherwise.
(c) If you do not use the Loan for the purpose set out in term 5 of the
agreement.
(d) If the Security or any part of the Security shall cease to be fully
enforceable in accordance with its terms or with effect from the date on
which the determination of the continuing nature of the Security or any
part of the Security occurs, such continuing nature is determined whether
such determination be by actual or constructive notice or be deemed to have
occurred or any binding undertaking provided in the Security or any part of
the Security shall be breached or any guarantor gives or purports to give
notice to terminate its liabilities under any guarantee in respect of the
Loan.
(e) If you sell or dispose of any asset listed in term 11 of the agreement
or it ceases to be in your sole possession.
(f) If your current account becomes overdrawn after the debiting of any
payment due from you under the Loan or it becomes overdrawn in excess
of any limit agreed with us and you do not offer payment in cash to us
when we inform you of this.
(g) If any representation, warranty or statement made to us by you in
connection with the Loan is breached or is false or if you fail to tell us
anything which in our opinion is material to the Loan.
(h) If you or any member of the Group make any default in the performance
of any other agreement for borrowed money whether with us or any other
lender whereby the due date of repayment thereunder Is rendered capable
of acceleration; or
If any of your indebtedness or the indebtedness of any member of the
Group becomes or is declared by the holder or the lender thereof to he due
and payable prior to its stated maturity or such indebtedness Is not repaid
in full at its stated maturity; or
If your indebtedness or the indebtedness of any member of the Group is
repayable On demand and is not repaid in full immediately upon demand being
made or if any guarantee or indemnity given by any giver of security in
connection with any of your liabilities to us or the liabilities of any
member of the Group to us or any other leader is not honoured when due and
called upon.
(i) If a petition is presented or a resolution passed for your winding up
or that of any member of the Group or a petition is presented for an
administration order to be made in relation to you or any member of the
Group; or
your directors or the directors of any member of the Group make a
proposal for a voluntary arrangement with your creditors or the creditors
of any member of the Group; or
you are unable to pay your debts within the meaning of Section 123 of
the Insolvency Act 1986 or any member of the Group is unable to pay its
debts within the meaning of such section or an encumbrancer takes
possession of or a receiver or an administrative receiver is appointed
over any of your assets or over the assets of any member of the Group.
(j) If there shall occur in our opinion a material effective change of
control (as defined by Section 840 of the income and Corporation Taxes Act
1988) of you or your Parent.
<PAGE>
COMMERCIAL FIXED RATE LOAN
(k) If there has occurred any change which in our reasonable opinion is a
material adverse change in your business, assets or financial condition or
in the business, assets or financial condition of the Group or any member
of the Group which, in our reasonable opinion, may affect your ability to
comply with your obligations under this agreement.
(1) If any judgement, distress, warrant of attachment, writ of execution
or similar process is Issued, levied or enforced upon any of your assets
or the assets of any member of the Group or if any asset held by the Bank
as security for the Loan is charged or becomes encumbered elsewhere.
(m) If you or any member of the Group ceases or threatens to cease to
carry on its business or sells, transfers or otherwise disposes of in any
one transaction or series of related transactions any substantial part of
its assets.
14 Delay in exercising our rights
If we delay in giving any notice or exercising any of our rights under
this agreement this should not he construed as a waiver of any of our
rights.
15 Demands and Notices
Any demand or notice to you will be made in writing and be signed by one of our
officers and served either by personal delivery on you at any place or by post
addressed to you at your place of business last known to us. Service by post on
you shall be deemed to be effective on the next Business Day after the date of
posting even if it is returned undelivered. Any notice to us under this
agreement must be made in writing and signed by a duly authorised officer on
your behalf. it must be delivered by hand or by post to the lending branch
specified in term 3 of the agreement.
16 Costs and Expenses
You will pay all costs, charges and expenses arising in connection with the Loan
and the Security including the negotiation and preparation of this agreement and
the Security and all costs, charges and expenses arising in connection with the
preservation and/or enforcement of our rights under this agreement or under the
Security and will indemnify us for any and all losses, costs and expenses
occasioned by the occurrence of an Event of Default.
17 Increased Costs and Illegality
(a) If we determine in our sole opinion that as a result of any law,
regulation, directive or official request (whether or not having the force
of law) ("Requirement") or compliance by us with any Requirement
(including compliance by us with any change in any Requirement or change
In the interpretation of any Requirement) the cost to us of funding,
maintaining or making available the Loan (or any undrawn amount of the
Loan) is increased or the effective return to us on the Loan is reduced
then you shall pay to us on demand such sum as may he certified to you by
us as shall compensate us for such increased cost or such reduction.
(b) If the effect of the introduction of or any change in applicable law
or directive or the interpretation of such law or directive is to make or
purport to make the Loan unlawful then our obligations under this
agreement shall cease and you will on demand pay to us all amounts
outstanding under the Loan.
<PAGE>
COMMERCIAL FIXED RATE LOAN
18 General Points
(a) If at any time any one or more of the provisions in this agreement is
or becomes invalid, illegal or unenforceable in any respect, the validity,
legality or enforceability of the remaining provisions of this agreement
shall not in any way be affected or impaired.
(b) Unless we expressly agree to do so in writing we do not hold ourselves
out as providing advice on or considering the general suitability of this
Loan for your particular circumstances (including tax circumstances) and
neither we nor our employees shall be liable for any indications given as
to such suitability. We make no warranties or representations about the
advisability of any underlying transaction entered into by you. You should
obtain independent professional advice on such matters, and upon any
Security required by us.
(c) This agreement is governed by the laws of England.
(d) All expressions in this letter bearing a plural meaning shall (where
the context so admits) also bear the singular meaning and vice versa.
(e) All references in this letter to any statutory provision shall be
deemed to include any statutory modification or re-enactment of such
provision.
19 Representations and Warranties
You represent and warrant that you have full power to accept and be bound by the
terms and conditions set out in this agreement and to draw the Loan and that you
have taken all necessary steps and obtained all necessary consents and
authorisations to do so and that accordingly this agreement constitutes your
legal, valid and binding obligations fully enforceable in accordance with their
terms.
You represent and warrant as follows:-
(a) You are duly incorporated and validly existing under the laws of
England.
(b) No Event of Default has occurred or is outstanding and no event has
occurred which with the giving of notice or the lapse of time would
constitute an Event of Default.
(c) All information, exhibits and reports furnished to us in connection
with this agreement were and remain true and accurate in all respects and
do not omit any facts thereby rendering misleading any statement contained
therein.
(d) The representations and warranties set out above shall survive your
acceptance of this agreement and the drawing of the Loan and shall be
deemed to be repeated on each day throughout the period of the Loan with
reference to the facts and circumstances existing at that time.
John McLellan
Manager
For and on behalf of
National Westminster Bank Plc
<PAGE>
COMMERCIAL FIXED RATE LOAN
FORM OF ACCEPTANCE
We accept the loan on the terms and conditions set out in this letter
By
For and on behalf of
VICON INDUSTRIES (UK) LTD
Date: 8-4-97
<PAGE>
COMMERCIAL FIXED RATE LOAN
SCHEDULE
Indicative Calculation of Maximum Breakage Costs
Actuarial Style (Reducing Capital and Interest)
Original Loan Amount 500,000 pounds
Terms of Loan 2 Years
Fixed Rate 10.25 percent
Term Expired 1 Year
Loan Amount Outstanding 251,505 pounds
Available Rate at Early
Repayment Date 8.625 percent
Breakage Costs 4,401 * pounds
As a guide only, the formula which will apply, can be stated as follows:
Current amount of loan outstanding
Multiplied by
Remaining period (in years) to maturity of the fixture
Multiplied by
(Existing loan rate minus(Current available fixed rate for the
remaining term - 0.125 percent))
Actual breakage costs will be confirmed on the day early redemption takes place
*Note: The breakage cost payable is subject to a minimum of 0.125% of the amount
of the Loan, and is in addition to the 0.5 percent prepayment fee.
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<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> SEP-30-1997 SEP-30-1997
<PERIOD-END> JUN-30-1997 JUN-30-1997
<CASH> 105,224 105,224
<SECURITIES> 0 0
<RECEIVABLES> 10,510,946 10,510,946
<ALLOWANCES> (476,320) (476,320)
<INVENTORY> 18,330,779 18,330,779
<CURRENT-ASSETS> 28,470,629 28,470,629
<PP&E> 15,214,065 15,214,065
<DEPRECIATION> (10,689,376) (10,689,376)
<TOTAL-ASSETS> 32,995,318 32,995,318
<CURRENT-LIABILITIES> 13,413,381 13,413,381
<BONDS> 9,417,378 9,417,378
0 0
0 0
<COMMON> 28,027 28,027
<OTHER-SE> 10,136,532 10,136,532
<TOTAL-LIABILITY-AND-EQUITY> 32,995,318 32,995,318
<SALES> 13,725,759 37,351,404
<TOTAL-REVENUES> 0 0
<CGS> 9,815,328 26,867,870
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 2,961,130 8,458,061
<LOSS-PROVISION> 81,053 196,053
<INTEREST-EXPENSE> 309,274 834,207
<INCOME-PRETAX> 558,974 995,213
<INCOME-TAX> 16,000 71,000
<INCOME-CONTINUING> 542,974 924,213
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 542,974 924,213
<EPS-PRIMARY> .18 .31
<EPS-DILUTED> .18 .30
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